A Basic Small Business Bookkeeping System by Mike Brassil
The first step in responsible financial management is to set up your own basic bookkeeping system. Choose a simple record-keeping system that is easy to understand. It should be simple to use, reliable, accurate, consistent and able to provide information on a timely basis. It will help you see how well the business is progressing. Maintain two updated sets and keep one off the premises.
The most useful system for a small, start-up business is generally based on what is known as the “one-write system” because it captures information at the time that individual transactions take place. It is an efficient method because, if you decide to computerize, it is compatible with electronic data processing eliminating the need to recopy data. If you know nothing about bookkeeping, have your accountant set up your books on the basis of the above simple method. Quicken and QuickBooks are basic software systems that are inexpensive and user friendly, allowing business owners to quickly and accurately handle regular financial record-keeping tasks.
There may also be other programs written specifically for your type of business. A visit to your local computer store is highly recommended.
The five vital bookkeeping journals are:
- Check register – Shows each check disbursed, the date of disbursement, check number, payee, the amount of money disbursed, and for what purpose.
- Cash receipts – Shows the amount of money received, from whom, and for what.
- Sales journal – Shows the business transaction, date, for whom it was performed, the amount of the invoice, and sales tax (if applicable.) It may be sub divided to indicate labor and goods.
- Voucher register – A record of bills, money owed, the date of the bill, to whom it is owed, the amount, and the service provided.
- General journal – A means of adjusting entries in the other four journals.
These journals are all that is necessary for a simple cash accounting system. This system can later be converted to an accrual method of accounting by simply journalizing accounts receivable, payable, accruals, prepaid insurance, etc.
Along with payroll records, you have all the information necessary to complete tax reports and returns as they come due. At the end of each annual accounting period, all the information for filing your tax returns will be at your fingertips. The figures from these journals are all you need to prepare your Financial Statements.
About the Author
Michael (Mike) Brassil is author of “The Only Business Start-Up Guide You Will Ever Need.” Download two chapters — Starting a New Business and The Home Working Revolution — at www.impactguide.com.
